The president has done yet another thing that will have massive effects on legal education. No, this is not about how I must overhaul my Consumer Finance syllabus. Granted, the poor saps who teach Constitutional Law have it worse, but they knew what they signed up for.

If you have not dug into the details of H.R. 1, An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14, there are some biggies for those who care about how legal education is funded and administered. Known in some circles as the "Big, Beautiful Bill," this law massively overhauls federal student loan programs. Jeff Robledo at USA Today has a good summary of what the changes mean for borrowers generally. For law schools, there is a biggie.

Section 81001 of the law eliminates Direct PLUS loans as an option for graduate and professional students. Originally designed for parents to borrow to help with the cost of undergraduate education, Direct PLUS loans expanded in 2006 to allow graduate and professional students to borrow for their own education (as Grad PLUS loans). With this new law's enactment, graduate and professional students will need to use Federal Direct Unsubsidized Stafford Loans.

The same section says professional students, such as JD students, cannot borrow more than $50,000 annually or $200,000 in a lifetime. For a three-year program of study, that is effectively a $150,000 cap. Will an enterprising law-school dean exploit that regulatory arbitrage to spread three years of instruction across four calendar years to the $200,000 cap?

This post was going to be about how the cap is mainly a tempest in a teapot, but facts got in the way. Quite a few students and law schools will be affected. Looking at the most recent year for which law student loan debt by school (2022), 14% of law schools reported average student borrowing of $150,000 or more. Those law schools accounted for one in every five graduates from 2022. If we heroically assume that student loan debt is normally distributed –  and it probably is not — that is 3,600 students who borrowed more than $150,000 to attend law school. Moreover those are 2022 figures, and data from the Common Fund suggest the costs of higher education have risen about 10% since then. If we inflation adjust the 2022 numbers, 24% of schools have average borrowing of $150,000 or more in 2025 dollars. Of course, inflation runs in one direction meaning more schools and students will hit the cap in the years to come as the new law does not have inflation indexing.

As someone who cares a lot about overindebtedness, one reaction is that the effects of the cap will not entirely be a bad thing. Does a law-school education really need to cost well in excess of $150,000? I downloaded LawHub's data and crunched the numbers. The costs are skewed toward private schools. The average student at a private law school borrowed $135,405 compared to $94,136 at a public school. Those numbers first tell us that most students do not need to borrow more than $150,000 right now (although again that will be less true as inflation raises law school costs). If the caps lead to a significant number of students valuing lower-priced public schools, that will create market pressure at private schools to keep costs more in check. All that would be a good thing.

It seems more likely that students will instead shift to private student loans to make up any shortfall. The rankings game plays an outsize role in legal education, and that game does not appear about to change any time soon. Many students use the rankings to make poor purchasing decisions on their education — although students are becoming increasingly sophisticated about weighing the costs of their education versus the economic benefits. Shifting to private student loans would be a bad thing. First, some students simply would not meet their underwriting criteria. Unlike the federal programs, private student lenders can deny loans to students who do not meet their standards. Second, private student loans are costly. (If anyone knows about data that are both good and current on private student loan interest rates, please post in the comments.) Third, private student loans offer far fewer protections and fallbacks for students who cannot repay their loans (or who are victims of predatory educational practices). 

In one little way, there appears to be a small win for law students. The interest rate on Grad PLUS loans right now is 8.94% but only 7.94% for Unsubsidized Stafford Loans. Both programs have upfront fees that come out of the amount borrowed — 1.057% for Unsubsidized Stafford Loans and 4.228% for PLUS loans. Those upfront fees slightly raise the annualized cost of borrowing, and again PLUS Loans carry the higher fee. The law also narrows loan forgiveness programs, generally requiring longer payment periods and more payment before loans are forgiven. Those details I will leave to elsewhere. The slightly lower interest rate will not compensate for these restricted options in the future. And, yes, the bill is even worse for graduate students who get even stricter caps and for other professional programs such as medical schools where the cost of attendance is greater.